40327 Preston Rd

Palmdale, CA 93551

$620,000D

4 bd · 2.0 ba · 2,426 sqft · Built 2001 · SingleFamily · Active · 91 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $5,431/mo
• Mortgage (P&I): −$3,251
• Tax + insurance: −$950
• HOA: −$0
• Vac / Maint / Mgmt: −$1,140
• Net cashflow: $89/mo
• Annual: $1,067/yr
• Cap rate: 6.46%
• Cash-on-cash: 0.61%
• DSCR: 1.03
• 1% rule: 0.88%
• Cash to close: $173,600

Investor read

• This is a 4-bed/2.0-bath single-family listed at $620k.
• At list price, monthly cash flow is $89 ($1k/yr) — positive.
• The deal already cash-flows at list — no discount required.
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $543k (12.4% below list).
• It's been on market 91 days — a 9% lower offer ($564k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $543k (12.4% below list) — sets the bar for 1% rule.
• Local home prices are declining (-3.0%/yr); year-one equity from $4k of loan paydown is wiped out by about $19k of value loss. Plan a longer hold.
• Location reads 55/100 on livability (#861 in CA) — a working-class tenant base; expect higher turnover. Strengths: housing A+; Watch: crime F, amenities F, cost of living F.
• Westside Union Elementary (suburban): math 34% / reading 49% proficiency, ranked #565 of 1,400 in CA (top 40%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases.
• Zoned schools: Esperanza Elementary (950 students, 61% FRL); Hillview Middle (math 10% / reading 10%, grade F, #474 of 498 statewide, top 99%, 907 students, 53% FRL); Highland High (2,790 students, 58% FRL) — zoned schools average 58% FRL vs 34% district-wide (23 pts higher); higher-poverty schools than district average — tighter screening recommended.
• Zoned-school proficiency averages 10% at this address vs 42% district-wide (-32 pts) — the specific schools serving this property underperform the Westside Union Elementary average; the district grade overstates school quality for this exact location.
• Market conditions: Rents rising (+2.3%/yr); 388 active listings in the ZIP; 6 comparable units currently listed for rent nearby; rentals leasing fast (median 1d on market — plan ~1-2 weeks tenant-placement turnaround); high-income renter base; 19,697 units permitted in Los Angeles County in 2024 (9,426 in 5+ unit buildings).
• Los Angeles County population projected at +9% by 2050 — modest demand growth; plan on rents tracking national, not racing it.
• 8 sale attempts since 5y ago with the ask held roughly flat each time — persistent listings suggest the price (not the market) is what's stuck; bring a comps-based counter.
• Climate carrying-cost: severe wildfire risk; extreme-heat days projected 5→13/yr by 2055 (HVAC capex compounding) — expect insurance premiums to compound above CPI over the hold.
• Cap rate 6.5% vs local median 4.5% in Palmdale — top-decile yield for the area; either an underpriced asset or a hidden risk that comps aren't pricing in. Stress-test before assuming the spread holds.
• At $5,431/mo this rent would consume 54% of the median local household income ($120k/yr) (locally 1168% of renters already pay >50% of income on rent) — very limited rent-growth headroom before tenants either downsize or default.

Questions for listing agent

• It's been on market 91 days. Have you received any prior offers? Is the seller open to a 12% concession, seller financing, or rate buy-down credit?
• Why hasn't it sold? Are there any deal-killer items the seller is aware of (foundation, flood, title, zoning, code violations)?
• Is there a deadline driving the sale (1031 exchange, divorce, estate, relocation)? That informs how much negotiation room exists.
• Schools are F-rated, which usually means shorter tenancies and higher turnover. Who's the typical renter profile here, and what's been the actual vacancy rate?
• Crime grade is F in this area — have there been break-ins, vandalism, or insurance claims at this property in the last 3 years? What carrier currently insures it and at what premium?
• The area grade is low — what's the realistic commute time and amenity access for the typical tenant pool here? Any planned neighborhood developments (good or bad) we should know about?
• What's the average days-on-market for RENTAL listings here right now (not sales)? A rising rental-DOM trend means longer vacancies and softer asking-rent achievability than the comps imply.
• What's the recent tenant-quality profile in this submarket — average credit score on applications, eviction rate, late-payment / NSF rate, and stable-employment percentage? A property-management company in the area should have these aggregated.